"It is gradually dawning on the global political elite that the economics they believe in do not work. They do not work, in particular, in the current crisis and continued pursuance of present policy is threatening a double dip recession (Morgan Stanley, the Bank of England's Andy Haldane), a 1930s-style monetary collapse (Fed dissenter Richard Fisher), Eurozone breakup (Nouriel Roubini) and political mayhem (Jeff Sachs)."

TBH, I don't see much 'dawning' on politicians, but Paul is right in concluding the economics 'do not work'.

But I have to scream at the effing monitor when I read "There is no more money for fiscal stimulus"

Absolute CRAP. Issuers of free floating fiat currencies (US, UK, Euro etc) are NEVER credit constrained.

It's not trivial that mainstream economists simply don't understand monetary operations. And this situation then completely hampers the adoption of fiscal management (& government action) that can get us out of the mess.

Given the inherent lead times in implementing the infrastructural changes we need, we're not at the 11th hour, but the 59th minute of the 11th hour.

MMT economist Prof Bill Mitchell has posted a superb refutation of Paul Krugman's pathetic attempt to put down MMT. It contains the key, but counter intuitive, elements that show how we can get the fiscal management & government involvement we need to adopt the steps on the scale required. And by enhancing rather than crowding out the private sector.

http://bilbo.economicoutlook.net/blog/?p=15722

PLEASE look at this most carefully people. Changing monetary & economic systems we use is both the way out of the recession (impending meltdown or massive depression) AND ESSENTIAL for moving to an ecologically sustainable future.

MMT is NOT a 'theory'. It is based on solid observation & knowledge of real world monetary operations. Piling more debt onto a debt mountain whilst strangling economies & further removing governments' ability to act in the public good thru' even more privatisation is making matters infinitely worse. The proportion of debt in the system, whether public or private MUST be reduced. MMT can do this & empower governments at the same time. It wasn't 'invented' yesterday. Key academic proponents have been advocating this approach for years. And not only academics. Warren Mosler is a financial industry insider with vast experience in real worls finance & considerable reputation. He +knows+ the MMT view is correct. Legendary former US regulator Bill Black that brought 1,000 successful prosecutions of S&L executives +knows+ MMT is correct. There is a growing group of supporters. Another one I discovered recently is a superb writer with an incredible knowledge of economics – Philip Pilkington, based in Dublin & blogging on Yves Smith's nakedcapitalism.com

The present crisis is only going to get (very much) more serious – & soon. Within every serious crisis there is a window of opportunity to transform thinking.

The world's gone mad!

"Globalization Has ‘Whipsawed’ U.S., Europe, Sachs Writes in FT
Q
By Alan Purkiss – Aug 18, 2011 6:29 AM GMT

Both the U.S. and European economies are being “whipsawed” by globalization, and the failure of governments to cope with that lies behind the collapse of market confidence in the euro area and America, said Jeffrey Sachs, who heads the Earth Institute at Columbia University.

Writing in the Financial Times, Sachs said employment in the U.S. and Europe in the early years of the century was held up only by housing construction, fueled by low interest rates and reckless deregulation.

Jobs for low-skilled workers in manufacturing, and investment in industry, have been lost to Asian competition, while proving a bonanza for the super-rich, who have been able to invest in highly profitable projects in emerging economies, he said.

The poor are hurt twice, first by global market forces, then by the ability of the rich to park money at low taxes in hideaways round the world, Sachs wrote.

An improved fiscal policy would expand investment in human and infrastructure capital; cut wasteful spending on misguided military adventures such as Iraq, Afghanistan and Yemen [sic! I presume he means Libya]; and balance budgets in the medium-term, partly through tax increases on high personal incomes and international corporate profits that are shielded by loopholes and overseas tax havens, Sachs concluded." (from Bloomberg)

The link to Sachs's article is given in Mason's post, though you have to register with the FT for 10 free articles a month (I'm over my limit).

For the last few years Andy Haldane of the BoE was brave enough to call it as it is:

http://hb.betterregulation.com/external/Speech%20by%20Mr%20Andrew%20Haldane%20-%20Curbing%20The%20Credit%20Cycle.pdf

"Credit lies at the heart of crises. Credit booms sow the seeds of subsequent credit crunches. This is a key lesson of past financial crashes, manias and panics (Minsky (1986), Kindleberger (1978), Rogoff and Reinhart (2009)). It was a lesson painfully re-taught to policymakers during the most recent financial crisis."

But today, he appears to be calling for more risk taking!

http://www.bankofengland.co.uk/publications/speeches/2011/speech513.pdf

Has our only hope for a sane voice in the BoE been nobbled, I wonder??

Thankyou.

I can’t do justice in short space of time, but here goes:

Minsky essentially demonstrates that economic stability creates the conditions for excessive borrowing, leading to speculative bubbles and ultimately financial instability.

Apparently it is at the core of the framework used in Kindlebergers Mania’s, Panics & Crashes (next on my reading list once I finish off Shaxson’s Treasure Islands!).

Minsky is also one of the few heterodox economists that policy makers dare acknowledge respect for. Which is quite remarkable as his theories (from what I understand anyway) show that the value of money (credit) can veer excessively from underlying real economic values. Peter Warburton’s excellent book “Debt & Delusion” also uses Minsky to stipulate that credit Quality is inversely proportional to credit Quantity (a theory I would dearly love to demonstrate if only someone would give me the PhD funding!!)

The Minsky Financial Instability Hypothesis is at the heart of the modelling work which Steve Keen undertakes (see his excellent piece The Roving Cavaliers of Credit).

The Paul Mason piece has a good summary of the policy implications under a Minskian regime (re-mutualising banks and properly severing ties with risk taking investment banking – which we all know all along should been under the regime of full Equity framework – privatised gains but privatised losses).